Northwest senators should stand with consumers on swipe fees

Choice, convenience and cost. When it comes to using your debit card, all three of these elements are now in play and coming to a vote this week in the U.S. Senate. It is also an opportunity for all four Northwest senators to give a boost to another element beginning with the letter "C": the consumer.

Passage last year of the Dodd-Frank Act was designed to hold large Wall Street banks accountable for their practices and provide greater transparency to consumers on transactions. Overall, the new law accomplishes that objective. A glaring exception was an 11th-hour amendment known as "interchange regulation" that was added to the bill without public debate. Our Senate delegation can now give consumers a chance to weigh in on the economic impact it may have on their families.

The provision actually stands to cost consumers more money, potentially limiting their access to debit cards, and give big retailers a windfall at their customers' expense. Some estimates place the figure as high as $15 billion that could get swiped from consumers' pockets and into the till of big retailers.

Sen. Jon Tester, D-Mont., and Sen. Bob Corker, R-Tenn., have introduced compromise legislation heading to the Senate floor that will delay implementing the interchange regulation for six months while an in-depth study is conducted to evaluate the impact on consumers and the small financial institutions that serve them. It is thoughtful, practical and just.

Debit cards are now the preferred payment method for consumers, surpassing credit cards or checks. They provide the ability for an individual to perform cash-like transactions while also being protected in case their card is lost or stolen. Financial institutions, such as credit unions, also guarantee payment to the retailer even if the card is used in a fraudulent transaction. This "insurance" is paid for by an interchange fee that retailers pay the payment network that provides these services. The amendment reduces the fee per transaction to a range of between 7 and 12 cents from the current average of 2 percent of the purchase transaction.

Small financial institutions such as most credit unions could not afford to cover the cost of debit card issuance and the protections they currently provide on behalf of their members. If retailers get to pocket the money they have been paying to use the debit card system, then it is the consumer who will pick up the tab in the form of higher fees, elimination of free checking accounts or even full access to the use of a debit card. That may be great for large retailers, but it's a fiscal torpedo for struggling families facing strong financial headwinds in a staggering economy.

Even Sen. Dick Durbin, D-Ill., the sponsor of last year's amendment, recognized the impact by including an exemption from the fee structure for small financial institutions. The problem is that the exemption is unlikely to work in the real world. What if a retailer refused to accept a consumer's credit card union or community bank debit card? Federal Reserve Chairman Ben Bernanke and FDIC Chairwoman Sheila Bair both testified last month that the rule could seriously harm small banks and credit unions and, as a result, the customers and members they serve.

Consumers deserve the opportunity to evaluate the full impact that cost shifting of interchange fees will have on their family budgets. Sens. Ron Wyden, Jeff Merkley, Patty Murray and Maria Cantwell should ensure that consumers are given that opportunity.

Troy Stang is president of the Northwest Credit Union Association, which serves 4.2 million members in Oregon and Washington.